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The Electric Power System is Inefficient

Today’s electric power system is shockingly inefficient in terms of both resource use and the market economy.

Approximately two-thirds of the fuel burned to generate electricity is lost in the generation and delivery process. Or, to put it another way, our electric power system operates at approximately 33 percent efficiency.

There has been no improvement in efficiency in the electric power industry since the 1960s.

Approximately 5 percent of the waste is the result of “line losses” — essentially power leakage as electricity travels from generator to end user. Line losses are increasing because the system is becoming overloaded. The amount of electricity lost over power lines has doubled between 1980 and 2006 placing in essence a $12 billion “tax” on electricity that consumers now pay.

By contrast, cogeneration, recycling waste heat at or near the end-use site, achieves efficiencies of 65 90 percent. In addition, recycling all of the available waste energy in the United States could cut in half the amount of fossil fuels burned by the power industry.

As a result of the system’s inefficiencies, generation of electric power produces more pollution than any other single industry in the United States. Recent data show that the U.S. electricity industry is responsible for:

  • 63 percent of sulfur dioxide emissions that contribute to acid rain
  • 22 percent of nitrous oxide emissions that contribute to urban smog
  • 39 percent of carbon emissions that contribute to global climate change
  • 33 percent of mercury emissions that pose significant health risks

Furthermore, air pollution has been linked to chronic respiratory disease, lung cancer, heart disease, and damage to the brain, nerves, liver and kidneys.

The economics of the electric power industry remain inefficient as a result of congestion on power distribution lines that do not have the capacity to handle the increase in trade spawned by the opening of the wholesale electricity market.

The estimated costs of congestion vary depending on the region. In New England, the costs of congestion are an estimated $125–$600 million a year; and, in California, the estimated cost of congestion along a single transmission corridor known as Path 15 was $222 million over the 16 months prior to December 2000.

In 2001, the Federal Energy Regulatory Commission (FERC) estimated that 16 congested areas along the North American grid cost $700 million for the months of June, July and August in 2000 and 2001.